IMF (file format)

In accordance with article 1 of the agreement, the IMF has the following objectives:

The highest governing body of the IMF is the Board of Governors, in which each member country is represented by a governor and his deputy. These are usually finance ministers or central bankers. The Board is responsible for resolving key issues of the Fund's activities: amendments to the Articles of Agreement, admission and exclusion of member countries, determination and revision of their shares in the capital, election of executive directors. The managers usually meet once a year, but they can hold meetings, as well as vote by mail at any time.

The International Monetary Fund (IMF) is a specialized agency (monetary fund) of the United Nations with its headquarters in Washington, USA. It is the largest financial institution in the world. Russia joined the IMF in 1992, becoming the 165th member of the organization. In 1996, the IMF introduced tranches of accounting loans. 190 countries are members of the IMF, 2,500 people from 133 countries of the world work in its structures. The IMF provides short- and medium-term loans with a deficit in the balance of payments of the state. The provision of loans is usually accompanied by a set of certain conditions and recommendations. The IMF's policy and recommendations regarding developing countries have been repeatedly criticized, the essence of which is that the implementation of recommendations and conditions, as a result, is not aimed at increasing the independence, stability and development of the national economy of the state, but only at linking it to international financial flows.

Unlike the World Bank, the IMF's activities are focused on relatively short-term macroeconomic crises. The World Bank provides loans only to poor countries, the IMF can lend to any of its member countries that lack foreign currency to cover short-term financial obligations.

History

At the Bretton Woods Conference of the United Nations on Monetary and Financial Issues on July 22, 1944, the basis of the agreement (the IMF Charter) was developed. The most significant contribution to the development of the IMF concept was made by John Maynard Keynes, who headed the British delegation, and Harry Dexter White, a senior official of the US Treasury. The final version of the agreement was signed by the first 29 states on December 27, 1945 — the official date of the creation of the IMF. The IMF began operations on March 1, 1947 as part of the Bretton Woods system. In the same year,

IMF goals

In accordance with article 1 of the agreement, the IMF has the following objectives:

• To promote the development of international cooperation in the monetary and financial sphere within the framework of a permanent institution providing a mechanism for consultations and joint work on international monetary and financial problems.

• Promote the expansion and balanced growth of international trade and thereby promote the achievement and maintenance of a high level of employment and real incomes, as well as the development of productive resources of all Member States, considering these actions as priorities of economic policy.

• Maintain currency stability and an orderly currency regime among Member States, as well as avoid currency devaluation in order to gain an advantage in competition.

• To assist in the creation of a multilateral system of settlements on current transactions between Member States, as well as in the elimination of currency restrictions that hinder the growth of world trade.

• By temporarily providing the general resources of the fund to Member States, subject to adequate guarantees, to create a state of confidence in them, thereby ensuring that it is possible to correct imbalances in their balance of payments without taking measures that could harm well-being at the national or international level.

• In accordance with the above, to reduce the duration of the imbalance of the external balance of payments of the Member States, as well as to reduce the scale of these violations.

The main functions of the IMF

• are to promote international cooperation in monetary policy

• expansion of world trade

• lending

• stabilization of monetary exchange rates

• advising debtor countries (debtors)

• assistance in training economic personnel

• development of international financial statistics standards

• collection and publication of international financial statistics

Structure of management bodies

The highest governing body of the IMF is the Board of Governors, in which each member country is represented by a governor and his deputy. These are usually finance ministers or central bankers. The Board is responsible for resolving key issues of the Fund's activities: amendments to the Articles of Agreement, admission and exclusion of member countries, determination and revision of their shares in the capital, election of executive directors. The managers usually meet once a year, but they can hold meetings, as well as vote by mail at any time.

The authorized capital is about 217 billion SDR (as of January 2008, 1 SDR was equal to about 1.5 US dollars). It is formed by contributions from Member States, each of which usually pays approximately 25% of its quota in SDR or in the currency of other members, and the remaining 75% in its national currency. Based on the size of quotas, votes are distributed among member countries in the governing bodies of the IMF.

The Governing Council delegates many of its powers to the Executive Board, that is, the Directorate, which is responsible for managing the affairs of the IMF, including a wide range of political, operational and administrative issues, in particular the provision of loans to member countries and the supervision of their exchange rate policy.

The Executive Board, which determines policy and is responsible for most decisions, consists of 24 executive directors. Directors are appointed by eight countries with the largest quotas in the Fund — the United States, Japan, Germany, France, the United Kingdom, China, Russia and Saudi Arabia. The remaining 176 countries are organized into 16 groups, each of which selects an executive director. An example of such a group of countries is the union of the former Central Asian republics of the USSR under the leadership of Switzerland, which was called Helvetistan. Often groups are formed by countries with similar interests and usually from the same region, for example, French-speaking countries in Africa.

The largest number of votes in the IMF (as of August 05, 2020) according to the IMF website are: USA — 16.51%; Japan — 6.15%; China — 6.08%; Germany — 5.32%; Great Britain — 4.03%; France — 4.03%; Russia — 2.59%; Saudi Arabia Arabia — 2.01%. The share of 27 EU member states is 25.55%.

The IMF operates on the principle of a "weighted" number of votes: the ability of member countries to influence the Fund's activities by voting is determined by their share in its capital. Each state has 250 "basic" votes regardless of the amount of its contribution to the capital and additionally one vote for every 100 thousand. SDR of the amount of this contribution. In the event that a country bought (sold) SDR received by it during the initial issue of SDR, the number of its votes increases (decreases) by 1 for every 400 thousand SDR purchased (sold). This correction is carried out by no more than ¼ of the number of votes received for the country's contribution to the Fund's capital. This procedure ensures a decisive majority of votes for the leading States.

Decisions in the Governing Council are usually taken by a simple majority (at least half) of votes, and on important issues of an operational or strategic nature — by a "special majority" (respectively 70 or 85% of the votes of the member countries). Despite a slight reduction in the share of votes of the US and the EU, they can still veto key decisions of the Fund, the adoption of which requires a maximum majority (85%). This means that the United States, together with the leading Western states, have the opportunity to exercise control over the decision-making process at the IMF and direct its activities based on their interests. With coordinated actions, developing countries are also able to prevent decisions that do not suit them. However, it is difficult to achieve consistency for a large number of heterogeneous countries. At the meeting of the Fund's managers in April 2004, the intention was expressed "to expand the opportunities of developing countries and countries with economies in transition to participate more effectively in the decision-making mechanism at the IMF."

The International Monetary and Financial Committee plays a significant role in the organizational structure of the IMF. From 1974 until September 1999, its predecessor was the Interim Committee on the International Monetary System. It consists of 24 IMF governors, including from Russia, and meets twice a year. This committee is an advisory body of the Governing Council and does not have the authority to make policy decisions. Nevertheless, he performs important functions: directs the activities of the Executive Board; Develops strategic decisions related to the functioning of the world monetary system and the activities of the IMF; submits proposals to the Board of Governors on amendments to the Articles of the IMF Agreement. A similar role is also played by the Development Committee — the Joint Ministerial Committee of the Boards of Governors of the World Bank and the Fund (Joint IMF — World Bank Development Committee).

The IMF Executive Board elects a Managing Director for a five-year term, who heads the staff of the Fund (as of March 2009 — about 2,478 people from 143 countries). As a rule, he represents one of the European countries. The Managing Director (from July 5, 2011 to July 2019) is Christine Lagarde (France), her first deputy is John Lipsky (USA). In July 2019, Lagarde announced her resignation in connection with her nomination for the post of head of the European Central Bank.

The main lending mechanisms

1. Reserve share. The first portion of foreign currency that a member country can purchase from the IMF within 25% of the quota was called "gold" before the Jamaica Agreement, since 1978 - Reserve Tranche. The reserve share is defined as the excess of the quota of a member country over the amount held in the account of the National Currency Fund of that country. If the IMF uses part of the national currency of a member country to provide credit to other countries, then the reserve share of such a country increases accordingly. The outstanding amount of loans provided by the member country to the Fund under the NHS and NHS loan agreements forms its credit position. The reserve share and the credit position together constitute the "reserve position" of an IMF member country.

2. Credit shares. Funds in foreign currency that can be acquired by a member country in excess of the reserve share (in the case of its full use, the IMF's holdings in the country's currency reach 100% of the quota) are divided into four credit shares, or Tranches, amounting to 25% of the quota. Member countries' access to IMF credit resources within the framework of credit shares is limited: the amount of a country's currency in IMF assets cannot exceed 200% of its quota (including 75% of the quota paid by subscription). Thus, the maximum amount of credit that a country can receive from the Fund as a result of using reserve and credit shares is 125% of its quota. However, the charter grants the IMF the right to suspend this restriction. On this basis, the Fund's resources are in many cases used in amounts exceeding the limit fixed in the charter. Therefore, the concept of "Upper Credit Tranches" has come to mean not only 75% of the quota, as in the early period of the IMF's activity, but amounts exceeding the first credit share.

3. Stand-by Arrangements (since 1952) provide a member country with a guarantee that within a certain amount and during the term of the agreement, subject to the stipulated conditions, the country can freely receive foreign currency from the IMF in exchange for the national currency. This practice of providing loans is the opening of a credit line. If the use of the first credit share can be carried out in the form of a direct purchase of foreign currency after the Fund approves its request, the allocation of funds to the account of the upper credit shares is usually carried out through agreements with member countries on reserve loans. From the 50s to the mid-70s, stand-by loan agreements had a term of up to a year, since 1977 - up to 18 months and even up to 3 years due to an increase in balance of payments deficits.

4. The Extended Fund Facility mechanism (since 1974) has supplemented the reserve and credit shares. It is designed to provide loans for longer periods and in larger amounts in relation to quotas than within the framework of conventional loan shares. The reason for a country's request to the IMF for a loan under extended lending is a serious imbalance in the balance of payments caused by adverse structural changes in production, trade or prices. Extended loans are usually granted for three years, if necessary — up to four years, in certain portions (tranches) at fixed intervals — once every six months, quarterly or (in some cases) monthly. The main purpose of stand-by loans and extended loans is to assist IMF member countries in implementing macroeconomic stabilization programs or structural reforms. The Fund requires the borrower country to fulfill certain conditions, and the degree of their rigidity increases with the transition from one loan share to another. Some conditions must be met before receiving a loan. The obligations of the borrower country, providing for the implementation of appropriate financial and economic measures, are recorded in the "Letter of Intent" or Memorandum of Economic and Financial Policies (Memorandum of Economic and Financial Policies) sent to the IMF. The progress of fulfillment of obligations by the recipient country of the loan is monitored by periodic evaluation of the special target implementation criteria provided for by the agreement (Performance criteria). These criteria can be either quantitative, related to certain macroeconomic indicators, or structural, reflecting institutional changes. If the IMF considers that a country uses a loan in contradiction with the goals of the Fund, does not fulfill its obligations, it can restrict its lending, refuse to provide the next tranche. Thus, this mechanism allows the IMF to exert economic pressure on the borrowing countries.